Global| Nov 06 2008U.S. Productivity Growth Weakened and Unit Labor Costs Surged
by:Tom Moeller
|in:Economy in Brief
Summary
Labor productivity in the nonfarm business sector rose 1.1% last quarter. That gain was down by two-thirds from the 2Q increase and by half from 1Q. Nonetheless, the y/y gain of 2.0% remained nearly the quickest since 2004. The latest [...]
Labor productivity in the nonfarm business sector rose 1.1% last quarter. That gain was down by two-thirds from the 2Q increase and by half from 1Q. Nonetheless, the y/y gain of 2.0% remained nearly the quickest since 2004. The latest increase about matched Consensus expectations for 3Q.
Output growth fell to a negative 1.7% (+0.3% y/y) which was its weakest since the 2001 recession. Productivity, however, still rose as hours worked were reduced by an even greater degree. They declined 2.7% (-1.7% y/y).
Growth in compensation per hour nevertheless accelerated to 4.7% and that raised the y/y growth to 4.3%.
As a result of weaker productivity and quicker compensation, unit labor cost growth jumped to 3.6%. That was off the recent highs near 4.0% but the trend is one of acceleration.
In the factory sector productivity declined at a 1.0% (+1.1% y/y) rate and that was the second consecutive quarterly decline following a 3.4% increase last year. Output declined 2.6% y/y and hours worked were reduced by an even greater 3.7% y/y. Compensation growth quickened to 5.1%, the fastest since 2006. As a result, unit labor cost growth 6.1% last quarter and by 3.9% y/y, the fastest since late-2006.
The Current State of the U.S. Economy and the Fed’s Response (With Reference to Irrational Exuberance and Virgil’s Aeneid) from the Federal Reserve Bank of Dallas is available here.
Multinationals Make the Most of IT from the Federal Reserve Bank of St. Louis is available here.
| Nonfarm Business Sector (SAAR, %) | 3Q '08 | 2Q '08 | Y/Y | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|
| Output per Hour | 1.1 | 3.6 | 2.0 | 1.4 | 1.0 | 1.8 |
| Compensation per Hour | 4.7 | 3.5 | 4.3 | 4.1 | 3.8 | 4.0 |
| Unit Labor Costs | 3.6 | -0.1 | 2.3 | 2.7 | 2.8 | 2.2 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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